Quisqueya I & II, San Pedro de Macorís, Dominican Republic

09/01/2014 | Thomas W. Overton, JD

With a huge gold mine set to increase the load on an already overstressed grid, the mine owners and a Dominican generation company found a way to power mine operations and address capacity shortfalls by joining forces on the same project.

Like many countries in the developing world, the Dominican Republic regularly struggles to meet the energy needs of its population. Much of the story is familiar: regular blackouts, high costs from inefficient infrastructure, rampant electricity theft, widespread self-generation, and a dysfunctional utility sector handicapped by a poorly designed regulatory regime. The nation also faces challenges common to island nations: a dependence on expensive imported fossil fuels and an inability to purchase power from neighboring countries when necessary. (The Dominican Republic shares the island of Hispaniola with Haiti, but that country’s barely functioning electricity sector is in far worse shape.)

Once entirely state-owned, the Dominican electricity business underwent a process of privatization and deregulation in the late 1990s and early 2000s, but that ambitious program has fallen well short of its goals. The Dominican Electricity Corp. (CDE), was broken up into a group of generation and transmission companies, and the sector was opened to independent producers. Though the program saw some initial success, with generation capacity increasing 43% and the capacity shortfall cut in half in just a few years, rising oil prices during the 2000s soon undercut the gains.

Part of the problem has been a convoluted system of tariffs and rate-setting that has created a perverse situation under which the country sees some of the highest electricity rates in Latin America, yet the generation companies can lose huge amounts of money due to an inability to index rates to the cost of fuel. (An inability to effectively combat electricity theft and nonpayment has also exacerbated the situation.) The government has been forced to make up the difference, with electricity subsidies constituting a significant portion of the national budget.

Worse, the privatization process failed to create a strong national oversight body, meaning the government’s ability to effect meaningful reform has been handicapped. CDE’s successor, the state-owned Dominican State Electrical Company Corp. (CDEEE), which owns the grid (much of it was renationalized in 2003) and oversees power purchase agreements with independent producers, is supposed to work with the Secretary of Electricity and the National Energy Commission (CNE), but in practice there are no mechanisms for enforcement of policy recommendations.

Though various attempts at reform have been made, to date there has been little progress in addressing the overall electricity crisis. And, though there has been a push toward diversification—two large coal plants are under development—the Dominican Republic still gets the largest share of its power (about 40%) from fuel oil. And despite the endemic problems, power demand has been growing at 5% annually.

All of this has left private companies and generators to meet their power needs as best they can.

Striking Gold

San Pedro de Macorís is a city of about 200,000 on the country’s southern coast, about 50 miles east of the capital, Santo Domingo. Beginning in 1975, the government operated a large gold mine northwest of the city, but it was abandoned in 1991 after falling gold prices made it uneconomic. In 2001, the government invited tenders to reopen the mine, and the contract was eventually won by Canadian firm Placer Dome, which was acquired by Toronto-based mining giant Barrick Gold in 2006. Barrick partnered 60/40 with fellow Canadian company Goldcorp to develop the mine, now known as Pueblo Viejo, and the two firms would ultimately spend $4 billion on the project.

But in addition to equipment, mining infrastructure, and environmental remediation, the new mine had one key need that had to be met: power. And the national grid was simply not reliable enough to support the operation Barrick wanted to run.

San Pedro de Macorís typifies the challenges facing the nation as a whole. The city gets much of its power from a 153-MW floating engine plant supplied by Wärtsilä. More than once, the plant has been forced to shut down when its owner, EGE Haina—one of the firms spun off from CDE—was unable to pay its fuel bills.

EGE Haina, the nation’s largest generator by installed capacity, needed to expand its generation in the area as well. That would soon lead to an unusual partnership, one that would eventually build the largest power plant in the Caribbean, the largest plant ever delivered by Wärtsilä, and one of the largest engine plants in the world.

Double or Nothing

In 2011, Barrick approached Wärtsilä about building a gas engine plant that would support operations at Pueblo Viejo. Barrick—which had previously purchased two other plants from Wärtsilä—needed a highly reliable, low-maintenance solution that would function efficiently in the hot, humid tropical environment. Wärtsilä already had significant experience developing plants in the Dominican Republic, with a total of 900 MW of generation then in operation (including EGE Haina’s barge plant). It proposed a plant based on its combined cycle Flexicycle design employing its 18V50DF engines.

The dual-fuel, 17.1-MW 18V50DF, introduced in 2007, has been deployed in both marine and power generation applications. It can run on natural gas and light or heavy fuel oil, and can change fuels on the fly. When operating on gas, it has an extremely low emissions profile. In Flexicycle configuration, the engine exhaust is directed through a heat-recovery steam generator, and the steam is used to drive a steam turbine. Flexicycle plants can achieve efficiencies approaching those of gas turbine combined cycle plants and can maintain that high efficiency across their full operating range (unlike gas turbines).

In September 2011, Barrick and Wärtsilä signed a turnkey contract to deliver a 215-MW Flexicycle plant at Pueblo Viejo comprising 12 18V50DF engines and an associated steam cycle.

EGE Haina had already been in discussions with Barrick about how the mine’s large power needs would affect the local grid. When plans for the new plant began taking shape, EGE Haina’s management realized the efficiencies and savings that could be captured by joining the project. In December, it signed a separate turnkey contract with Wärtsilä for a nearly identical plant on the same site. Thus, the single 215-MW plant became a parallel two-unit 430-MW project, the largest Wärtsilä had ever delivered.

The combined plant would cost about $700 million, with Barrick and EGE Haina each contributing $350 million (again, via separate contracts). That figure represented almost a third of the total energy infrastructure investment in the Dominican Republic over the previous 13 years, according to government data.

Construction and Commissioning

Site work started in February 2012. The initial plan was for a four-month gap between the two projects, but delays in permitting meant that both plants had to be constructed on a very similar time schedule. The shift in schedule meant that a large number of tasks had to be carried out in parallel, and the engine halls had to be built more or less simultaneously. This created a more crowded job site, which put extra pressure on site supervision and workers.

The simple cycle system was completed in the summer of 2013. Performance tests began in September, and the completed plants were handed over in December. Construction peaked at 1,400 workers; approximately 3.5 million man-hours were put in by final completion.

Quisqueya I is owned by Barrick, while Quisqueya II is owned by EGE Haina, but the plants function more or less as one, from a single control room operated by EGE Haina personnel. Quisqueya I powers the Pueblo Viejo mine—which reached commercial production shortly before the plant was complete—with excess electricity flowing to the grid; Quisqueya II delivers power solely to the grid. About 150 workers are employed at the site (Figure 1).

1. Two plants, one site. The Quisqueya I and II plants in the Dominican Republic are nominally separate but operate as one. Both plants send power to the national grid, though Quisqueya I primarily supports the nearby Pueblo Viejo gold mine. Waste heat recovery systems on the two plants each drive a steam turbine generator that supplements power from the engines. Courtesy: EGE Haina

The startup of the Quisqueya plants had an immediate impact on the Dominican energy market. The CNE announced shortly afterward that Quisqueya’s generation had caused a 30% drop in spot prices for electricity, from $0.20/kWh to $0.14/kWh. This resulted in significant savings to both end users and CDEEE, which purchases up to 20% of its power on the spot market.

In addition, the large size of the facility, as well as the high flexibility of an engine-based plant, means Quisqueya is also capable of providing frequency support for the national grid.

Though the plants are initially being run on fuel oil, they will switch over to natural gas as soon as reliable supplies are available. Over the long term, it is hoped that fuel for the plant will come from a liquefied natural gas import terminal being proposed for San Pedro de Macorís. This would supply not just the Quisqueya plants but also several other plants in the area that are under construction or planned for conversion to gas firing.

For leveraging a public-private partnership to supply badly needed generation and frequency support as well as supporting an important industrial project in a difficult development environment, Quisqueya is a deserving Top Plant. ■

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